ASHLAND GLOBAL HOLDINGS INC - FORM 8-K - EX-99.2 - May 12, 2017

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Exhibit 99.2
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited condensed pro forma consolidated financial statements are based upon the historical financial statements of Ashland Global Holdings Inc. and its consolidated subsidiaries (Ashland), adjusted to reflect the distribution to Ashland stockholders of an aggregate 170 million shares of Valvoline Inc. (Valvoline) common stock.  The following unaudited condensed pro forma consolidated financial statements of Ashland should be read in conjunction with the related notes and with the historical consolidated financial statements of Ashland and the related notes included in previous filings with the Securities and Exchange Commission.  The unaudited condensed pro forma consolidated balance sheet reflects the distribution of Valvoline as if it occurred on March 31, 2017 while the unaudited condensed pro forma statements of consolidated income give effect to the distribution as if it occurred on October 1, 2013, the beginning of the earliest period presented.  The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that Ashland management believe are reasonable.  Actual amounts may differ from these estimated amounts.
The unaudited condensed pro forma consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the distribution of Valvoline closed on March 31, 2017 for the unaudited condensed pro forma consolidated balance sheet or on October 1, 2013 for the unaudited condensed pro forma statements of consolidated income.  For example, these financial statements do not reflect any cost reductions of previously allocated corporate costs and potential subsequent restructuring charges.  Readers should not rely on the unaudited condensed pro forma consolidated financial statements as being indicative of the historical operating results that Ashland would have achieved or any future operating results or financial position that it will experience after the distribution closes.
 
Ashland Global Holdings Inc. and Consolidated Subsidiaries
                        
Unaudited Condensed Pro Forma Consolidated Balance Sheet
                        
March 31, 2017
                        
         
(a)
    
(d)
        
(In millions)
  
Historical
    
Valvoline
    
Adjustments
    
Pro Forma
  
                         
ASSETS
                        
Current assets
                        
Cash and cash equivalents
  
$
605
    
$
(135
)
  
$
-
    
$
470
  
Accounts receivable     972       (402 )      -       570  
Inventories
    
687
      
(148
)
    
-
      
539
  
Other assets
    
113
      
(25
)
    
11
      
99
  
Total current assets
    
2,377
      
(710
)
    
11
      
1,678
  
Noncurrent assets
                                
Property, plant and equipment
                                
Cost
    
4,364
      
(765
)
    
-
      
3,599
  
Accumulated depreciation
    
2,159
      
(416
)
    
-
      
1,743
  
Net property, plant and equipment
    
2,205
      
(349
)
    
-
      
1,856
  
Goodwill
    
2,413
      
(312
)
    
-
      
2,101
  
Intangibles
    
1,017
      
(6
)
    
-
      
1,011
  
Restricted investments
    
298
      
-
      
-
      
298
  
Asbestos insurance receivable
    
193
      
-
      
-
      
193
  
Equity and other unconsolidated investments
    
61
      
(30
)
    
-
      
31
  
Deferred income taxes
    
199
      
-
      
(163
)
    
36
  
Other assets
    
423
      
(85
)
    
77
      
415
  
Total noncurrent assets
    
6,809
      
(782
)
    
(86
)
    
5,941
  
Total assets
  
$
9,186
    
$
(1,492
)
  
$
(75
)
  
$
7,619
  
                                 
LIABILITIES AND EQUITY
                                
Current liabilities
                                
Short-term debt
  
$
95
    
$
(75
)
  
$
-
    
$
20
  
Current portion of long-term debt
    
16
      
(16
)
    
-
      
-
  
Trade and other payables
    
520
      
(173
)
    
-
      
347
  
Accrued expenses and other liabilities
    
406
      
(181
)
    
11
      
236
  
Total current liabilities
    
1,037
      
(445
)
    
11
      
603
  
Noncurrent liabilities
                                
Long-term debt
    
2,812
      
(656
)
    
-
      
2,156
  
Employee benefit obligations
    
1,017
      
(833
)
    
-
      
184
  
Asbestos litigation reserve
    
663
      
-
      
-
      
663
  
Deferred income taxes
    
69
      
389
      
(163
)
    
295
  
Other liabilities
    
445
      
(162
)
    
77
      
360
  
Total noncurrent liabilities
    
5,006
      
(1,262
)
    
(86
)
    
3,658
  
                                 
Equity
                                
Total Ashland stockholders' equity
    
3,300
      
58
      
-
      
3,358
  
Noncontrolling interest
    
(157
)
    
157
      
-
      
-
  
Total equity
    
3,143
      
215
      
-
      
3,358
  
Total liabilities and equity
  
$
9,186
    
$
(1,492
)
  
$
(75
)
  
$
7,619
  
                                 
                                 
                                 
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements.
                          

Ashland Global Holdings Inc. and Consolidated Subsidiaries
                    
Unaudited Condensed Pro Forma Statement of Consolidated Income
                    
Six months ended March 31, 2017
                    
         
(b)
          
(In millions except per share data)
  
Historical
    
Valvoline
    
Pro Forma
    
                     
                     
Sales
  
$
2,513
    
$
(1,003
)
  
$
1,510
    
Cost of sales
    
1,694
      
(603
)
    
1,091
    
Gross profit
    
819
      
(400
)
    
419
    
                           
Selling, general and administrative expense
    
483
      
(172
)
    
311
    
Research and development expense
    
47
      
(6
)
    
41
    
Equity and other income
    
18
      
(15
)
    
3
    
Operating income
    
307
      
(237
)
    
70
    
                           
Net interest and other financing expense
    
170
      
(18
)
    
152
    
Net loss on divestiture
    
(1
)
    
-
      
(1
)
  
Income (loss) from continuing operations before income taxes
    
136
      
(219
)
    
(83
)
  
Income tax expense (benefit)
    
24
      
(70
)
    
(46
)
  
Income (loss) from continuing operations
  
$
112
    
$
(149
)
  
$
(37
)
  
                           
Earnings per share from continuing operations attributable to Ashland
                          
  Basic
  
$
1.42
    
 
 
  
$
(0.59
)
  
  Diluted
    
1.41
      
 
 
    
(0.59
)
  
                           
Average common shares outstanding (in millions)
                          
  Basic
    
62
      
 
      
62
    
  Diluted
    
63
      
 
 
    
62
  
(c)
                           
                           
                           
                           
                           
                           
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements.
                    
 
 
 
Ashland Global Holdings Inc. and Consolidated Subsidiaries
                       
Unaudited Condensed Pro Forma Statement of Consolidated Income
                       
Year ended September 30, 2016
                       
         
(b)
           
(In millions except per share data)
  
Historical
    
Valvoline
    
Pro Forma
    
                         
                         
Sales
  
$
4,948
    
$
(1,929
)
  
$
3,019
    
Cost of sales
    
3,321
      
(1,168
)
    
2,153
    
Gross profit
    
1,627
      
(761
)
    
866
    
                               
Selling, general and administrative expense
    
1,228
      
(314
)
    
914
    
Research and development expense
    
100
      
(13
)
    
87
    
Equity and other income
    
28
      
(20
)
    
8
    
Operating income (loss)
    
327
      
(454
)
    
(127
)
  
                               
Net interest and other financing expense
    
182
      
(9
)
    
173
    
Net loss on divestitures
    
(9
)
    
1
      
(8
)
  
Income (loss) from continuing operations before income taxes
    
136
      
(444
)
    
(308
)
  
Income tax expense (benefit)
    
133
      
(158
)
    
(25
)
  
Income (loss) from continuing operations
  
$
3
    
$
(286
)
  
$
(283
)
  
                               
Earnings per share from continuing operations attributable to Ashland
                             
  Basic
  
$
0.03
    
 
 
 
  
$
(4.51
)
  
  Diluted
    
0.03
      
 
 
    
(4.51
)
  
                               
Average common shares outstanding (in millions)
                             
  Basic
    
63
      
 
      
63
    
  Diluted
    
64
      
 
 
    
63
  
(c)
                               
                               
                               
                               
                               
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements.
                      

Ashland Global Holdings Inc. and Consolidated Subsidiaries
                       
Unaudited Condensed Pro Forma Statement of Consolidated Income
                  
Year ended September 30, 2015
                       
         
(b)
           
(In millions except per share data)
  
Historical
    
Valvoline
    
Pro Forma
    
                         
                         
Sales
  
$
5,387
    
$
(1,967
)
  
$
3,420
    
Cost of sales
    
3,814
      
(1,282
)
    
2,532
    
Gross profit
    
1,573
      
(685
)
    
888
    
                               
Selling, general and administrative expense
    
1,028
      
(336
)
    
692
    
Research and development expense
    
110
      
(11
)
    
99
    
Equity and other income
    
23
      
(8
)
    
15
    
Operating income
    
458
      
(346
)
    
112
    
                               
Net interest and other financing expense
    
174
      
-
      
174
    
Net loss on divestitures
    
(115
)
    
26
      
(89
)
  
Income (loss) from continuing operations before income taxes
    
169
      
(320
)
    
(151
)
  
Income tax benefit
    
(22
)
    
(117
)
    
(139
)
  
Income (loss) from continuing operations
  
$
191
    
$
(203
)
  
$
(12
)
  
                               
Earnings per share from continuing operations
                             
  Basic
  
$
2.81
    
 
 
 
  
$
(0.18
)
  
  Diluted
    
2.78
      
 
 
    
(0.18
)
  
                               
Average common shares outstanding (in millions)
                             
  Basic
    
68
      
 
      
68
    
  Diluted
    
69
      
 
 
    
68
  
(c)
                               
                               
                               
                               
                               
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements.
                      

 
 
Ashland Global Holdings Inc. and Consolidated Subsidiaries
                       
Unaudited Condensed Pro Forma Statement of Consolidated Income
                  
Year ended September 30, 2014
                       
         
(b)
           
(In millions except per share data)
  
Historical
    
Valvoline
    
Pro Forma
    
                         
                         
Sales
  
$
6,121
    
$
(2,041
)
  
$
4,080
    
Cost of sales
    
4,605
      
(1,409
)
    
3,196
    
Gross profit
    
1,516
      
(632
)
    
884
    
                               
Selling, general and administrative expense
    
1,358
      
(356
)
    
1,002
    
Research and development expense
    
114
      
(11
)
    
103
    
Equity and other income (loss)
    
2
      
(30
)
    
(28
)
  
Operating income (loss)
    
46
      
(295
)
    
(249
)
  
                               
Net interest and other financing expense
    
166
      
-
      
166
    
Net gain on divestitures
    
4
      
-
      
4
    
Loss from continuing operations before income taxes
    
(116
)
    
(295
)
    
(411
)
  
Income tax benefit
    
(188
)
    
(102
)
    
(290
)
  
Income (loss) from continuing operations
  
$
72
    
$
(193
)
  
$
(121
)
  
                               
Earnings per share from continuing operations
                             
  Basic
  
$
0.94
    
 
 
 
  
$
(1.57
)
  
  Diluted
    
0.93
      
 
 
    
(1.57
)
  
                               
Average common shares outstanding (in millions)
                             
  Basic
    
77
      
 
      
77
    
  Diluted
    
78
      
 
 
    
77
  
(c)
                               
                               
                               
                               
                               
                               
See Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements.
                      

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(a)  These adjustments reflect the elimination of assets and liabilities associated with Valvoline and included in Ashland's historical condensed consolidated financial statements.
(b)  These adjustments eliminate the operating results of Valvoline as if the transaction occurred on October 1, 2013.  The direct operating results of Valvoline are reported in discontinued operations.  The amounts eliminated do not include allocations of corporate expenses included in Selling, General and Administrative Expense.  These corporate expenses were $22 million, $23 million and $25 million for the fiscal years ended September 30, 2016, 2015 and 2014, respectively.  Allocations of corporate overhead remaining with Ashland may not be allocated to discontinued operations for financial statement presentation purposes.
Additionally, a portion of the other components of pension and other postretirement benefit costs (i.e., interest cost, expected return on assets, amortization of prior service credit, and actuarial gain or loss) related to Valvoline has been reclassified from the Unallocated and other segment and included within Valvoline’s results. The amounts attributable to Valvoline were income of $43 million and $35 million for the six months ended March 31, 2017 and the fiscal year ended September 30, 2016, respectively, and expense of $37 million and $52 million for the fiscal years ended September 30, 2015 and 2014, respectively.
For purposes of these unaudited condensed pro forma consolidated financial statements, estimated income tax rates of 32%, 36%, 37% and 35%  have been used for the six months ended March 31, 2017 and fiscal years ended September 30, 2016, 2015 and 2014, respectively.  The estimated effective tax rates are based on the application of the intraperiod tax allocation model in ASC 740, Income Taxes, and the impact of changes in the mix of global earnings and permanent items.
(c)  As a result of the loss from continuing operations on a pro forma basis, the effect of the share-based awards convertible to common shares would be anti-dilutive.  As such, they have been excluded from the diluted calculation.
(d)  Adjustments related to the Tax Matters Agreement and stand alone tax effects.

ASHLAND GLOBAL HOLDINGS INC Reports